Overview of Ecuador’s oil and gas industry

In 2020, Ecuador was the fifth-largest oil producer in South America behind Brazil, Colombia, Argentina, and Venezuela. Petroleum and other liquids represented 62% of Ecuador’s total energy consumption in 2020; hydroelectric power was the second-largest energy source, and natural gas and other renewable fuels accounted for the remainder of Ecuador’s energy mix.

According to Global Trade Tracker, Ecuador exported 360,000 barrels per day of crude oil in 2020. The country relies heavily on oil export revenue; in 2020 Ecuador exported approximately 74% of the crude oil it produced. Crude oil exports accounted for 49% of the country’s export earnings, and 21% of public sector revenues in 2019.

In 2020, the United States received most of Ecuador’s crude oil exports, averaging 169,000 barrels per day, or 46% of total exports. China, Chile, Japan, and India were among the top export destinations for Ecuador’s crude oil.

In 2020, Ecuador produced an average of 483,000 barrels of oil per day – down from 534,000 barrels per day in 2019 (a 9,55% decline) due to a landslide in the Amazon region that damaged the state-run Transecuatoriano’s Sistema Oleducto Trans-Ecuatoriano (SOTE) pipeline – and had proven oil reserves of approximately 8.3 billion barrels; this accounted for approximately 4,4% of the country’s GDP. The majority of Ecuador’s oil production comes from the Amazon region, where the country’s largest oil fields are located. The main oil-producing companies in Ecuador include Petroamazonas, Repsol, and Petroecuador.

Petroamazonas is a state-owned company that produces more than half of the country’s oil, while Repsol and Petroecuador are international companies that also have a significant presence in the country.

In addition to oil, Ecuador also has significant natural gas reserves. The country’s proven natural gas reserves were estimated to be approximately 385 billion cubic feet in 2020. The majority of Ecuador’s natural gas production comes from the Amistad and Sacha gas fields, which are located in the eastern part of the country.

Ecuador’s gas industry is still in its early stages of development compared to its oil industry. The country’s gas production was approximately 12 billion cubic feet per day in 2020, which is a relatively small amount compared to other gas-producing countries in the region. However, there have been some recent developments that suggest Ecuador’s gas industry is starting to gain momentum.

Ecuador’s upcoming bidding round

According to the Minister of Mines and Energy, Xavier Vera, Ecuador is planning to offer, most likely in 2024, blocks for offshore exploration and production of natural gas at the Gulf of Guayaquil, following auctions for onshore areas to be completed next year.

Ecuador expects to boost crude production to 750,000 barrels per day by 2025 from a current 483,000 barrels per day. A large portion of the increase is planned to come from onshore areas awarded as part of its Intracampos oil round, whose second phase is currently on offer.

​​Vera expects to greenlight a proposal for the gas blocks, in shallow and deep waters of the Gulf of Guayaquil, in the coming months once areas are defined; the model will be production sharing contracts.

To support the expected production growth, the Vice Minister of Mines and Energy, Xavier Briz, the Ministry is also evaluating the availability of drilling rigs to secure units. Specialized equipment will also be needed for expanded exploration, following a 15-year pause in exploration by private companies in the nation.

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Further developing Ecuador’s gas industry

One of the most significant developments in Ecuador’s gas industry in recent years has been the discovery of new gas reserves. In 2020, a consortium led by Repsol discovered a new gas field in the south of the country, which is estimated to contain approximately 1.4 trillion cubic feet of natural gas. This discovery represents a significant increase in Ecuador’s proven gas reserves and could help to meet the country’s growing demand for natural gas.

In addition to the new gas field, there have been other recent developments in Ecuador’s gas industry. For example, the government recently signed an agreement with a Chinese company to build a new natural gas pipeline, which will transport gas from the Amistad field in the east of the country to the city of Guayaquil on the Pacific coast. This pipeline is expected to help increase the supply of natural gas to the country’s largest city.

There have also been some challenges in Ecuador’s gas industry. One of the main challenges is the lack of infrastructure needed to transport and distribute natural gas within the country. This has led to a situation where much of the natural gas produced in Ecuador is either flared or exported to neighboring countries, rather than being used domestically.

Despite these challenges, there are reasons to be optimistic about the future of Ecuador’s gas industry. The discovery of new gas reserves, along with the government’s commitment to increasing domestic production and reducing reliance on imported gas, suggests that the industry is starting to gain momentum. If the government can address the challenges facing the industry, Ecuador could become a major player in the regional gas market.

Immediate need for gas in Ecuador

Despite having significant natural gas reserves, Ecuador has traditionally relied on imported natural gas to meet its energy needs. This is largely due to the lack of infrastructure needed to transport and distribute natural gas within the country. However, in recent years, there has been an increased demand for natural gas in Ecuador, and the government is taking steps to address this need.

One of the main reasons for the increased demand for natural gas in Ecuador is the country’s growing population and economy. As the population grows, so does the demand for energy, and natural gas is seen as a cleaner and more efficient source of energy than other fossil fuels. Additionally, the country’s economy is becoming more industrialized, and natural gas is needed to power industrial processes.

Another factor driving the demand for natural gas in Ecuador is the country’s commitment to reducing greenhouse gas emissions. Natural gas produces fewer emissions than other fossil fuels, such as coal and oil, and is therefore seen as a more environmentally friendly option. To address the immediate need for gas in Ecuador, the government has taken several steps to increase domestic production and reduce reliance on imported natural gas. These steps include:

Expansion of natural gas infrastructure: the government is investing in the expansion of natural gas infrastructure, including the construction of pipelines and storage facilities. This will make it easier to transport and distribute natural gas within the country.

Incentives for domestic production: the government is also offering incentives to companies that invest in domestic natural gas production. This includes tax breaks and other financial incentives.

Development of new gas fields: the government is actively seeking to develop new gas fields within the country. This includes exploration and production agreements with international oil and gas companies.

Conversion of power plants: the government is working to convert power plants from oil-fired to natural gas-fired, which will increase the demand for natural gas within the country.

Regional oil and gas cooperation

In March 2023, the Presidents of the Dominican Republic, and Ecuador, Luis Abinader and Guillermo Lasso, respectively, announced that they had reached an agreement to start talks and establish an alliance between the 2 countries, aimed at evaluating the exploitation of natural gas and increasing its supply for the benefit of the sustainable development of both nations.

As highlighted by President Lasso, “we have agreed to start talks for an alliance between the 2 countries, with the objective of evaluating the repowering of the Amistad field of natural gas to increase the supply of this resource for the benefit of the sustainable development of both nations”.

Furthermore, Lasso stressed that they have agreed on the interest in carrying out analysis and exploration activities and additional production of Ecuadorian crude, with a view to satisfying the long-term needs of the Dominican Republic.

Ecuador’s growing renewable sector

While Ecuador’s oil and gas industry has long been the focus of the country’s energy sector, there is an increasing recognition of the potential of renewable energy sources in Ecuador. With a wealth of natural resources, including ample sunlight, strong winds, and flowing rivers, Ecuador has the potential to be a leader in renewable energy production in the region.

Solar energy is one of the most promising renewable energy sources in Ecuador, with the country receiving an average of 5.5 hours of sunlight per day. According to a report by the International Renewable Energy Agency (IRENA), Ecuador has the potential to generate over 15,000MW of solar energy, which is more than 10 times the country’s current installed capacity.  

Wind energy is another promising renewable energy source in Ecuador, with the country’s coastal regions experiencing strong and consistent winds. According to IRENA, Ecuador has the potential to generate over 9,000MW of wind energy, which is more than 30 times the country’s current installed capacity.

Hydroelectric power has long been an important source of energy in Ecuador, with the country’s numerous rivers and waterfalls providing ample opportunities for hydroelectric power generation. According to IRENA, Ecuador has the potential to generate over 15,000MW of hydroelectric power, which is more than 5 times the country’s current installed capacity.

Despite the potential of renewable energy sources in Ecuador, the country’s renewable energy sector is still in its early stages. However, there have been some recent developments in the sector that suggest that renewable energy could play a more significant role in Ecuador’s energy mix in the future.

El Aromo solar project

At the end of 2022, the Ecuadorian government announced it was to sign a 20-year contract with Spanish company Solarpackteam to build and operate a solar plant on part of the site of the abandoned Pacific Refinery. The photovoltaic plant will generate 200MW, enough to cover 60% of Manta’s electricity demand, according to official estimates.

According to the Ministry of Mines and Energy, the El Aromo photovoltaic project will be the most important project of its kind in Ecuador to date, stating that “the company is investing approximately USD $144 million in the construction of the project”. As highlighted by Enith Carrión, Ecuador’s Deputy Minister of Electricity and Renewable Energy, “the company will provide all the investment, all the civil and mechanical works, and so on”, adding that the Ecuadorian state will pay 0.6 cents for each kilowatt of energy delivered per hour. After 20 years, the plant will be transferred to the state.

According to the Ministry of Mines and Energy, the project will represent a reduction of 221,000 tonnes of carbon dioxide per year by enabling the country to reduce its use of regional oil-powered power stations. It will also avoid the use of around 100 million litres of diesel for both power generation and transport every year, equivalent to the consumption of around 5,000 buses.

Other clean projects in Ecuador

Another significant recent renewable energy project in Ecuador is the 200MW wind farm being developed by Spanish energy company Acciona. The wind farm, which is located in the province of Loja in southern Ecuador, will generate enough energy to power over 400,000 homes.

Furthermore, the 110MW solar power plant being developed by Chinese energy company Sinohydro, which is located in the province of Cañar in southern Ecuador, is expected to generate enough energy to power over 350,000 homes.

In addition to these large-scale projects, there are also smaller-scale renewable energy projects being developed in Ecuador. For example, the government has been promoting the use of solar water heaters in households, which can help to reduce the demand for electricity and lower energy costs for households.

Moving forward

IN-VR expects to hold the first Ecuador Energy Summit at the end of 2023, where investors are expected to be attracted through the discussion of the aforementioned topics. This event represents the opening of IN-VR’s fifth energy market in South America; other markets include Brazil, Argentina, Colombia, and Uruguay.

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